Questions about equity from work: how it is taxed, what the restrictions are, and the extra benefits a sale can unlock.
When you sell around maternity leave, the employment-income portion of the sale is reported through payroll and spread back over the preceding months, so Bituach Leumi recalculates the maternity allowance (dmei leda). If your income base has not yet reached the statutory ceiling, the allowance goes up accordingly.
The full explanation, with numbers ›As with a sale around maternity leave, selling around reserve duty makes Bituach Leumi recalculate reserve-duty compensation (tagmulei miluim). If your income base has not yet reached the statutory ceiling, the compensation goes up accordingly.
The full explanation, with numbers ›A Restricted Stock Unit grant is a benefit given by your employer to reward employees. The grant vests over several years and is subject to Section 102 of the Income Tax Ordinance. To learn more, watch one of the podcasts on the In the Media page.
The grant price is the share's average price over the 30 trading days preceding the grant date. It matters because it tells you the share price on which you'll pay income tax once two years have passed and the share has risen. If two years haven't passed, or the share price has fallen, you'll pay income tax on the entire sale amount.
In Israel, the vesting prices have no significance at all. For RSUs granted in the U.S., they actually do.
In the standard Section 102 trustee arrangement the trustee withholds 62.2% on the employment-income portion and 25% on the capital-gains portion at source, and transfers the balance straight to your bank account (less the sale and transfer fees). If your income is high in general, and in particular after an RSU sale, you will need to file an annual return after the end of the tax year.
Section 102 of the Israeli Income Tax Ordinance governs how shares and options granted to employees are taxed. The common route for tech employees is the capital-gains track with a trustee: the shares are deposited with a trustee, there is no tax event at grant or at vesting, and tax is due only on sale, split between employment income on the grant-date value and capital gains tax on the rest. To get capital gains treatment on the gain (usually lower than the tax on employment income), the sale has to happen two years and a day after the grant date. For example: for a grant made on 12.12.2020, from 13.12.2022 onwards the gain is taxed as a capital gain. If you sell earlier, or the share price has fallen since the grant, the entire sale amount is taxed as employment income.
The employment-income portion is taxed at your marginal rate (through the bracket system), plus National Insurance and health levy up to the ceiling. The gain, provided the sale met the Section 102 conditions and there is in fact a gain, is taxed as a capital gain. If you sell a large number of shares you may move up into the next bracket or the top one, and you may end up owing surtax as well.
Yes, selling a large number of shares and moving up to a higher tax bracket will increase your tax rate. The site will take your new rate into account.
An ESPP is a plan that lets an employee buy shares at a discount, at certain times and under certain conditions. You can hold the shares (Keep) or sell them immediately when the plan ends (Quick Sale).
With a trustee (the Section 102 capital-gains track), the shares are held by a trustee for a holding period of at least 2 years from the end of the offering period. Nothing is taxed at purchase: when you eventually sell, the discount you received is taxed as employment income (marginal rate + Bituah Leumi & health, up to the ceilings), and any gain above the purchase price is taxed as capital gains (25%, plus surtax where applicable). Without a trustee, the discount is already taxed as employment income at the purchase date through your payroll; only the later gain above the purchase price is taxed as capital gains when you sell. The site handles both - just pick the matching option.
Yes. Because these are shares bought with the employee's own money, if the share price and/or the USD-ILS rate falls there can be a loss — part of which can be used as a tax shield against future gains.
The purchased price is the share price before the ESPP discount (usually the lower of the offering-period start price and the purchase-date price). The discounted price is what you actually paid per share after the discount (e.g., purchased price × 0.85 for a 15% discount). The difference between them is the benefit, taxed as employment income.
The plan end date is needed only for plans with a trustee (Section 102), to determine whether 2 years have passed since the plan ended. If they have, the gain above the purchase price is taxed as capital gains; if not, it is taxed as employment income. Without a trustee the field is irrelevant and is hidden.